A windfall profits tax? Why won’t the 1970s stay dead?

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Apparently there is no idea bad enough that it can’t be resurrected by desperate politicians, as veteran Capitol Hill watcher Pete Davis notes at the must-read Capital Gains and Games blog:

This morning at a closed House Democratic caucus, a proposal to impose a windfall profits tax on health insurers to help pay for health reform gained support. No details were presented, but the politics were right as numerous members emerged to endorse the idea. Some members said as much as $100 b. could be raised over ten years. It’s doubtful the Senate could pass it, but this is definitely a shot across the bow of health insurers.

The last windfall profits tax on oil, actually an excise tax, was enacted on April 2, 1980 as price controls were phased out. It was repealed on August 23, 1988. It was projected to raise $393 b. based upon oil price assumptions that proved so incorrect that it only actually raised $80 b. On a net basis, after taking into account income tax deductions and lower receipts from the sale of oil from federal properties, the windfall profits tax only raised $38 b. To say the windfall profits tax failed to achieve its objectives is an understatement. This Congressional Research Service report provides the evidence.

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James Pethokoukis is the Money & Politics columnist for Reuters Breakingviews. Previously, he was the business editor and economics columnist for U.S. News & World Report. Pethokoukis has written for many publications including The New York Times, The Weekly Standard, Commentary, USA Today, and Investor's Business Daily. Pethokoukis is also an official CNBC contributor. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN, and Nightly Business Report on PBS. A graduate of Northwestern University and the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! champion. james.pethokoukis@thomsonreuters.com